Home equity loans have become very popular among home owners, and with good reason. The benefits this type loan has to offer outweigh the drawbacks by far and it is relatively easy to qualify for as you pledge your home as a collateral for it. The interest rates are relatively low and they are also tax deductible! The obtained funds can be used for any purpose and even lines of credit are available for those seeking the same advantages but looking for more flexibility There really is a lot to say regarding home equity loans, but of course not everything should be seen through a rose-colored glass. This loan also carries disadvantages which should not be taken lightly and must be considered even before deciding this is the way to go. Here you will find a list of things to consider before applying. Observation # 1:Have you stopped for a moment to consider the fact that this is a secured loan? Meaning that you will be borrowing the money against your house. This is one of the reasons why lenders offer such good terms: they run very few risks. So keep this in mind before applying, make sure you will be able to repay the loan timely, or you could lose your home in the process. And this is not an overstatement. Observation # 2:Not every lender lets the borrower know this, but they should. If you sign the contract, you have a period of time to change your mind. You have three days by law to request a cancellation of the contract. Observation # 3:It is a common mistake to think that fees charged by lenders are always the same ones. While interest rates and loan terms might not vary from lender to lender, fees are completely personal and each lender will charge whatever fees he might want. You should request loan quotes from each lender and choose the appropriate lending institution accordingly. These loan quotes should have all the fees and charges properly disclosed so as to achieve a good comparison between them. Observation # 4:Did you know that the rate on most home equity loans is adjustable? Make sure you will be able to afford the adjustments and ask the lender what type of rate your loan will have if you are not sure. Otherwise, it will be one nasty surprise. Observation # 5:Be careful with your money during the application process. Any debt you might take at this point will have a negative impact on your credit report and you might face a decline on your application because of this. Also, moving large sums of money between your bank accounts might require further explanations to the lender and will surely delay the application process. Observation # 6:If you are in a desperate situation and in need of a high sum of money your current equity does not cover, you might be tempted to apply for a High Loan-to-value Loan. With this type of loan you might obtain up to 125% of the value of your property. I am sure this is very attractive, but bear in mind that if your home does not increase in value throughout the life of the loan, you will have to find other means of paying for the additional money you received.
Posts Tagged ‘Secured Loan’
Home Equity Loans – Things to Consider to Achieve the Best Deal
December 18th, 2009Secured Home Equity Loan Gives Debt A Good Name
December 14th, 2009We know debt is bad. We know it could take us forever to pay off interest. But we make quick purchases to keep up with the Joneses, anyway. We go on a shopping spree because something looked good on TV, or simply to reward ourselves for getting through the workweek. We buy cars, home stereo systems, and self-twirling spaghetti forks we certainly could live without. By the time we find ourselves staring at a hefty bill less than 30 days later, we rue our impulsive decision to buy, buy, buy.
Some things, however, are worth getting into debt for. If you’re a wage earner, nothing spells security just as much as land or a house does. You need never fear being homeless again, and secured home equity loans make it possible.
The Basics
A home equity loan gives you the opportunity to use your home’s equity as collateral, in order to borrow money. Collateral is property that guarantees you will pay back a debt. To get your home’s equity value, you subtract how much you still owe on your mortgage from your home’s value. A home equity loan qualifies as a secured loan, as it is secured against a major asset. In this case, the asset is a home, although it may also include other properties.
The Second Mortgage
A secured home equity loan is also referred to as a second mortgage. Like the first mortgage, your property secures a home equity loan. In a nutshell, this loan transforms equity into cash, which people use for a variety of purposes. Home improvements, a popular choice, add equity to your home. Other common reasons for taking out a secured home equity loan include paying for your children’s college education, medical expenses, family emergencies, and huge purchases; or consolidating your debt.
The Terms
Before you take out a secured home equity loan, you should be aware of the terms. You receive the loan in one lump sum at one time. Also, once you take out the loan, you cannot borrow again from the loan. In addition, it is possible to take out more than one loan on the mortgage of your home. But if you do that, make sure to notify your lenders.
The Payback
The benefit of taking out a secured home equity loan is that you can make investments that will last a lifetime. The drawback is that you have to pay the money back. The payments remain the same every month. While first mortgages must be repaid in about 30 years, second mortgages must typically be paid back in half that time. Nonetheless, that figure is not carved in stone, and the repayment period can range from five to 30 years.
The Risks
If you take out a secured home equity loan, you naturally have every intention of paying it back. After all, you know that if you default on payments, you could lose your land or your house. Thankfully, lenders of secured home equity loans often understand when borrowers have short-term problems with their payments. Conventional wisdom says that if you are willing to put your house on the line, then you are willing to give your heart and soul to make payments.
Though debt has become a dirty word in society, repayment need not be a nightmare. Secured home equity loan can help give you a fresh start in life.
By: Rony Walker
Home Equity Loans and How to Get the Best One
December 13th, 2009What Is A Home Equity Loan?
A home equity loan is a secured loan that uses your equity in your home as collateral. Home equity loans can be obtained at competitive interest rates and with flexible repayment terms. Many lenders are even willing to extend home equity loans to those with damaged credit; due to the fact these types of loans are less risky for the lender.
While your local bank may offer home equity loans, in many cases it is wise to look elsewhere for a home equity loan. Seek out companies that are dedicated solely to providing loans. By doing so, you increase your chances of getting better rates and better terms.
Shop around, not only for different types of lenders, but also for different types of loans. Take a look at loans with both fixed and variable interest rates. In most cases, a fixed rate loan is best, saving you from being at the mercy of fluctuating interest rates. However, there is no harm in looking at variable interest rate loans as well, just in case you find a variable interest rate loan that fits your particular needs better than a comparable fixed-rate loan.
Don’t bite off more than you can chew. There may be a temptation to take out a loan in a larger than necessary amount. Though you may be able to think of many things you could do with the extra money, you have to keep in mind that you are required to repay the money you borrow. Borrowing a huge amount may make it difficult for you to repay your loan and may lead to you losing your home and severely damaging your credit. Instead, go for a loan in an amount you can repay without a struggle.
How to Get the Best Home Equity Loan
Wondering how to get the best home equity loan? Like with so many things, the secret to getting the best deal lies in taking the time to research and compare. Obtain loan quotes from several different types of lenders to ensure you find the loan with the lowest possible rate and the best repayment terms.
Don’t stop at just comparing quotes, however. Ask plenty of questions. Speak to the lenders you contact for quotes and ask for a detailed explanation of the loan plans they offer. If there’s something you don’t understand, ask for an explanation. Though you may feel that you have enough information about interest rates and monthly payments to make a decision, it is best to make certain you know the details of the loan you are considering inside and out. Making a decision too quickly can cause you to overlook important information, ending with you paying more for your loan than is necessary.
Go ahead and negotiate. If you feel you may be able to get a better loan deal, let the lenders and brokers you are dealing with know you have other offers. Request lower interest rates and better terms from each lender and let them compete for your business. This type of negotiation just may assist you in getting a better loan deal.
Above all, read all the paperwork you receive carefully before you sign it. After you’ve read it once, read it again. Don’t overlook the fine print. Reading through all the paperwork carefully can save you tons of money and years of headaches. If the documents contain mistakes or are not what you expected, do not sign. Contact the lender to negotiate changes or take your business elsewhere.
